China’s benchmark money-market rate had the biggest five-day jump since December after the central bank drained funds from the banking system for a sixth week.
The People’s Bank of China withdrew a net 48 billion yuan ($7.7 billion) this week issuing repurchase agreements, adding to a total of 828 billion yuan removed since the week-long Lunar New Year holidays in early February, data compiled by Bloomberg show. The yuan had a record weekly decline as the China Beige Book survey showed the economy slowed this quarter, and after Federal Reserve Chair Janet Yellen indicated U.S. interest rates could rise six months after the central bank’s bond buying ends.
“The market started to feel the impact of the continuous repo sales,” said Zhang Guoyu, an analyst at Orient Futures Co. in Shanghai. “As the yuan’s decline may persist in the very near term, a drop in inflows could add further pressure to the market. Liquidity will probably tighten further.”
The seven-day repurchase rate, a gauge of interbank liquidity, jumped 101 basis points this week and 11 basis points today to 3.59 percent, according to a daily fixing compiled by the National Interbank Funding Center released around 11 a.m. in Shanghai. That was the biggest weekly gain since the period ended Dec. 21.
The fixed payment to receive the floating seven-day repo rate for one year in interest-rate swaps climbed 14 basis points, or 0.14 percentage point, this week to 4.19 percent as of 4:28 p.m. local time, data compiled by Bloomberg show. That’s the biggest increase since the five days ended Jan. 3. The rate declined three basis points today.
The yield on the 4.08 percent sovereign bonds due August 2023 rose five basis points this week to 4.50 percent, according to data from the National Interbank Funding Center. It decreased one basis point today.
China’s industries including retail and mining showed weaker revenue growth, while loans through non-traditional channels became more expensive, according to the China Beige Book survey, published by New York-based CBB International. Even with the moderation, the labor market and wage growth were little changed from the previous quarter, according to the private survey.